Whether you’re buying your first, second, or tenth home, purchasing a home can be the most expensive transaction an individual makes in their life. For a buyer, one of the biggest concerns is the transfer of property ownership. They want to know whether they are receiving good and marketable title of the property they are purchasing. For this reason, understanding title insurance is crucial in real estate closings.
Buyers feel defeated when they discover title defects, cloud on title, charges, liens, encumbrances, and lack of right of access to and from their property. This is where title insurance comes in to assure title based on the specific needs, expectations, and risk tolerances of the real estate transaction. In this blog, we will discuss the following:
Jump Ahead To These Sections
- The Purpose of Title Insurance
- The Scope of Policy Coverages
- How to Purchase Title Insurance?
- Is it Worth Purchasing in a Real Estate Transaction?
What is Title Insurance?
Title insurance is a policy that protects purchasers and lenders against losses related to title or ownership. Distinct from other insurance policies, title insurance covers damages arising out of title defects that were unknown before the time of closing. Typically, these issues come to light after the transaction is complete. Title insurance reimburses the purchasers if losses arise for specific causes covered by the insurance policy. It’s common for lenders to require purchasers to obtain title insurance to provide the buyers with funds to close the deals. It allows purchasers and lenders to insure over selected problems rather than repairing the issues.
What is the Scope of Policy Coverage?
Title insurance policies vary from jurisdiction, companies, and availability of coverage for different purchasers and lenders based on the property being acquired. It’s important to read the policy contract to determine what’s covered and what’s excluded from the coverage. Generally, title insurance provides coverage for types of losses like the title to the fee simple estate of the subject property, any title defects, encumbrances on title, marketability of title, and certain types of frauds like identity theft. Your real estate lawyer can help you understand the different policies that exist, the coverages available, and the benefits of title insurance for your real estate transaction.
Types of Losses Covered:
- Title defects that prevent you from having free encumbrances or clear title
- Existing liens (i.e. property taxes, condominium charges, mortgages, unpaid debts, and utilities)
- Title fraud
- Encroachments
- Issues in public records and surveys
- Title and ownership issues that impact your ability to sell, mortgage, or lease the property
How Do You Purchase Title Insurance?
Most title insurance companies require a lawyer to purchase the title insurance policy on behalf of their purchasing clients. According to Title Insurance Licences, O.Reg. 69/07 under the Insurance Act, R.S.O. 1990, c. I.8, title insurance policy can’t be issued without a concurrent title certificate provided by a lawyer who is not employed by the title insurance company. The lawyer is required to receive consent from the client before ordering the policy. You can also purchase title insurance through a title insurance company or an insurance agent/broker.
Is Title Insurance Worth It?
Advantages
- You don’t need to pay for certain searches which are waived by the title insurance companies saving money in the long run.
- The cost of title insurance is a one-time payment known as a premium.
- Title insurance can provide additional coverage for defects that might not be covered by the lawyer’s indemnity insurance for the lawyer’s opinion on title should any problems arise in the future (I.e., LAWPRO Insurance).
Disadvantages
- Title insurance doesn’t repair the problem, it just insures over the issues.
- Additional expenses to include in your cost for closing.
- Title insurance companies can exclude coverages for known defects on the title that is important to you.
- Title insurance doesn’t cover Aboriginal Land Title Claims, Environmental hazards, certain zoning bylaw violations, and problems that could be discovered with a new survey or inspection of the property.
Ultimately, it’s up to you whether you would like to purchase title insurance in Ontario during your real estate closing transaction. Although it is not a requirement in Ontario, most real estate lawyers recommend obtaining title insurance as layered protection for home purchasers. It is important to discuss what type of protection is included with your lawyer and determine whether the policy is right for your situation.
About TR Law Firm
TR Law Firm helps clients navigate complex problems to ensure that their legal issues are resolved. If you need any real estate legal consultation, please contact us to set a virtual chat with our experienced lawyers or feel free to call us at (905) 463-2088 or email at info@pmlawyers.ca.
